Business Finance
EXCHANGE RATE SYSTEM

Question Description

Imagine that you own a business in which the majority of revenue came from exporting products to other countries. Determine if you would support a fixed or flexible exchange rate system

Final Answer

If revenues for my company came from exporting products to other countries, I would support a fixed exchange rate system for following reasons:

1. A fixed rate system is suitable to set pricing for long term.  This way it helps you to plan for production for long term.

2.  This system helps to obtain financing on a long term basis which gives you a favorable rate for borrowing.

3.  Generally fixed rate system causes low inflation.  This minimizes price fluctuations which benefits my customers.

4.  This system allows to establish long term relationship with your customers overseas.

Niru B (1011)
New York University

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